Prior art digital assets, such as Bitcoin, utilize competition among nodes in the digital asset network in order to provide confirmation of transactions. Nodes known as miners compete to solve a computationally intensive mathematical puzzle in order to confirm pending digital asset transactions. Confirming transactions can also entail the minting of new digital assets. Upon confirmation of the transactions, a distributed public ledger is updated. The Bitcoin ledger is known as the blockchain. Successive blocks or portions that are appended to the blockchain ledger contain details of the confirmed transactions. Mining computers thus add a new block to the blockchain when they solve the computationally intensive puzzle. The Bitcoin governing protocol increases the difficulty of the mathematical puzzle based upon the network processing power in order to govern the mining frequency. The resulting frequency is mining of new Bitcoin blocks approximately every ten minutes, although the exact mining cycle varies since there is no guarantee of its frequency.
The mathematical puzzle is the heart of the Bitcoin proof of work system. The successful miner that solved the puzzle broadcasts the solution to other nodes in the network, which can easily confirm the solution, proving the work of the successful miner. The puzzle is difficult to solve but easy to verify. The computers in the network verify the work of the successful miner so that there is no need to trust that the successful miner indeed solved the puzzle correctly.
The mining computers in the Bitcoin system race to solve the puzzle. Bitcoin mining nodes thus participate in a competitive proof of work system. The result is ever-increasing resource consumption by the miner computers. Mining operations previously performed on average desktop computers are now being performed by consortiums of specifically designed mining computing hardware. Because the computing processing requirements and accompanying electricity consumption have become so great, what started as a distributed mining system has become centralized in a few consortiums of powerful mining computer hardware. The massive consumption of electricity required to mine bitcoins is exacerbated by the competition among miners. Since there is only one successful miner in each confirmation cycle, the resources expended by the non-successful mining computers are wasted.
Alternative digital currencies have been proposed to reduce resource consumption. However, some alternatives, such as PeerCoin, rely upon proof of stake. There is no race to solve a computationally intense puzzle, as the amount of the digital asset owned is used to select the miner. However, this type of system encourages hoarding of digital assets, which undermines a robust digital asset ecosystem such as one that could be used as a payment network. Also, because competition still exists to confirm transactions, there can be instabilities and risks of double spending the digital asset and/or orphan transactions that do not get confirmed. Bitcoin suffers some of these same problems. Transacting participants are advised to wait about six confirmation cycles (mining cycles) to have assurance that their transaction was indeed confirmed by a majority of the network and not just confirmed in an orphan block. An orphan block is a block that is not part of the main blockchain. It can be caused by the competitive mining process, where multiple miners solve the puzzle and thus confirm certain transactions at a similar time. Each successful miner will propagate its latest block, which other miners will build upon in solving the next block. However, only the blockchain that is recognized by the majority of the network is the valid blockchain. Accordingly, orphan block chains may grow for a number of mining cycles until the valid blockchain eventually takes over. Thus there is a need to wait for much longer than the mining confirmation cycle in order to have assurance that the digital asset network recognizes a transaction as confirmed. Reducing the time period of a mining cycle does not necessarily solve the problem. Because blocks are added to the blockchain faster, off-shoots of the main blockchain simply grow faster such that the same number of confirmation cycles no longer gives assurance that a transaction is part of the main blockchain. Accordingly, a higher number of confirmation cycles must be waited to have assurance that a transaction is recognized by the majority of the network.
A major feature of many digital assets including Bitcoin is their decentralization. There is no central control but rather the processing of the network provides authority to confirm transactions. This is viewed as a beneficial alternative to payment networks and/or currency systems with centralized control, which can have weakness due to a single point of attack and/or can be controlled by a select minority (e.g., a government or a corporation), which may exercise unrestricted influence. For example, a corporation running a centralized payment network may charge large transaction processing fees, or a government may adjust the amount of a currency in circulation or otherwise alter the value. Moreover, a government-provided currency may have territorial restrictions.
There is a need for a digital asset system that provides near-instant or rapid confirmation without having to wait to ensure that confirmed transactions are indeed recognized by a majority of the digital asset network. There is a further desire to provide such a system without requiring intense resource consumption. It remains desirable to provide a trustless digital asset system, where nodes in the network need not trust the work of other nodes, such as mining nodes. Such a trustless system can increase security of the digital asset network. It is also desirable to eliminate risks of double spending the asset.